Len Blavatnik’s Warner Music has won the auction for former EMI labels including Parlophone, the home to Coldplay, David Guetta and Pink Floyd, with a much higher than expected £487m offer that will allow Universal Music to recoup almost half of the money it spent on EMI.
The outcome of a disposal process demanded by European regulators as a condition of clearing Universal’s £1.2bn acquisition of EMI’s recorded music division last September brings to an end Warner’s near 15-year pursuit of EMI.
Warner was frustrated for years by regulators, and later outbid first by Guy Hands and then Universal, but the US group will become a slightly stronger number three in recorded music after Universal and Sony Music. Warner’s relatively small market share in Europe means the deal is not expected to encounter strong opposition from the European Commission.
Cost savings from integrating Parlophone could improve the return on Mr Blavatnik’s $3.3bn takeover of Warner Music, struck in 2011, but his offer far exceeded those of any rival bidder.
Warner was seen as being able to extract more savings from the acquisition than other bidders, but its victory will surprise some industry members who thought that the US group’s vocal lobbying against Universal’s EMI deal could count against it in the auction.
However, people involved in the negotiations said Warner’s bid was $100m or more ahead of other bidders, some of which had not even submitted final offers when Universal announced the agreed deal, which was struck as industry members gathered in Los Angeles for Sunday’s Grammy awards.
The outcome is a blow to other bidders. BMG, a joint venture between Bertelsmann and KKR, had joined forces with Sony Music for the auction, with other offers coming from Simon Fuller and Chris Blackwell, two music executives, and from Ronald Perelman, the billionaire US investor.
Universal and its French owner, Vivendi, have already sold Mute Records to BMG, and have other assets including Sanctuary, Jazzland and EMI’s share of the Now compilation series to sell which could raise an estimated £100m.
The Parlophone label group includes the Chrysalis label and former EMI recorded music businesses in nine European markets including France, Spain and Sweden. Universal will keep EMI labels including Virgin, Capitol and Blue Note, with artists including The Beatles, Katy Perry and Swedish House Mafia.
“We’re satisfied that our agreement with Warner Music will provide a home for [Parlophone label group] artists,” said Lucian Grainge, Universal’s chairman and chief executive, reiterating a pledge to invest in “rebuilding” EMI.
Universal and Vivendi were advised by Goldman Sachs and Bank of America Merrill Lynch, with legal advice from SJ Berwin, Shearman & Sterling and Smiths Law.
Parlophone has annual revenues of about £300m and earnings before interest, tax, depreciation and amortisation of about £70m, people involved in the auction said.
